On $1$ July $2020,$ Krispy acquired $60\%$ of the ordinary share capital $($i$.$e$.,$ acquired $60000$ shares$)$ of Kracker for R$370000$ cash and thereby obtained control over Kracker on that date. The share capital of Kracker on $1$ July $2020$ was R$100000,$ the retained earnings was R$214000($credit balance$)$ and the mark$-$to$-$market reserve was R$235200.$ All Kracker$$s assets and liabilities were considered to be fairly valued on this date except for SOFTWARE LICENCES $($the following, for which the respective fair value has been indicated below:$)$

Carrying value $=$ R$50000$

Fair value $=$ R$100000$

Remaining useful life from $1$ July $2020=2\mathrm{.}5$ years

Krispy elected to measure the non$-$controlling interest at its fair value of R$248200$ at the acquisition date. Kracker also measures investments in subsidiaries and associates at cost in its separate financial statements.

The South African Revenue Services $($SARS$)$ allows the same annual deduction as the annual accounting amortisation recorded in the accounting records of Kracker.

On $1$ January $2023,$ Krispy disposed $30000$ of its ordinary shares in Kracker for R$510000($the shares$$ fair value$)$ and thereby exercised significant influence over Kracker from $1$ January $2023.$ All Kracker$$s assets and liabilities were considered to be fairly valued on the disposal date. On $1$ January $2023,$ the fair value of Krispy$$s remaining interest in Kracker was R$500000.$

Included in $$other income$$ of Krispy is the gain on disposal of the shares in Kracker of R$325000[$calculated as R$510000$ minus $($R$370000$ x $30\%/60\%)].$ The tax effect of the sale transaction was included in the tax expense $[$calculated as R$325000$ x $27\%$ x $80\%=$ R$70200]$

The mark$-$to$-$market reserve relates only to fair value adjustments relating to investments

made by Kracker which are classified as investments measured at fair value through other

comprehensive income in terms of IFRS $9.$ All of these investments were disposed of on

$31$ December $2022$ at market value $($fair value$)$ and the sale was correctly recorded in the

records of Kracker. It is the company$$s policy to release the gains from the mark$-$to$-$market

reserve to the retained earnings when the investments are sold however this has not yet

been recorded in the records of Kracker. No dividends were received from these

investments during the $2023$ financial year.

Since $1$ February $2023,$ Kracker started selling inventory to Krispy at a profit of $50\%$ on

cost$.$ The inventory is then used as part of Krispy$$s inventory and on$-$sold to third parties.

Inventory $($sold from Kracker to Krispy$),$ which cost Krispy R$42000,$ was still on hand at

the end of the $2023$ financial year.

All dividends were declared and paid on $30$ June $2023.$ Dividends received by Krispy from

Kracker have been included as part of Krispy$$s $$other income$.$

Other information:

$$ Kracker's profit was earned evenly throughout the financial year.

$$ Kracker amortises licences on a straight$-$line basis based on their useful lives.

$$ All companies in the Krispy Ltd Group have a $30$ June financial year$-$end.

$$ Krispy is not a share trader for income tax purposes.

$$ There were no changes to the shareholding $($e$.$g$.$ the number of shares in issue$)$ of

Kracker since Krispy$$s acquisition on $1$ July $2020.$

$$ Assume a company income tax rate of $27\%$ for all periods and $80\%$ of capital gains

are included in taxable income in all periods at the time gains are realised.

$$ Ignore the effects of dividend tax and value added tax $($VAT$).$

REQUIRED

$1\mathrm{.}1$ Calculate the goodwill or gain on bargain purchase on the initial acquisition of the The following trial balances were obtained from the financial records of Krispy Ltd

$("$Krispy$")$ and Kracker Ltd $("$Kracker$")$ for the financial year ended $30$ June $2023$:$60\%$ shareholding in Kracker Ltd$.$

Indicate what portion of the goodwill or bargain purchase gain relates to Krispy Ltd and what portion relates to the non$-$controlling interest $($NCI$).$

Clearly show and reference all workings.

Round off to the nearest Rand, where necessary. $(12$ marks$)$

$1\mathrm{.}2$ Prepare the Consolidated Statement of Profit and Loss and Other Comprehensive Income for the Krispy Group for the financial year ended $30$ June $2023.$

Show and reference all your workings and calculations.

Comparative figures and notes to the annual financial statements are not required.

Round off to the nearest Rand, where necessary.